SES AI Corporation

Hello everyone and welcome to the SES AI Corporation third quarter earnings conference call. My name is Bruno and I'll be operating your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. I will now hand over to your host, Eric Goldstein, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Hello everyone and welcome to our conference call covering our third quarter earnings 2023 Results and Financial Guidance for 2023. Joining me today are Chi Chow Hu, Founder and Chief Executive Officer, and Jing Mielis, Chief Financial Officer. We issued our shareholder letter earlier this morning, which provides a business update as well as our financial results. You'll find a press release with a link to our shareholder letter in today's conference call webcast in the investor relations section of our website at ses.ai. Before we get started, this is a reminder that the discussion today may contain forward-looking information or forward-looking statements within the meaning of applicable securities legislation. These statements are based on our predictions and expectations as of today. Such statements involve certain risks, assumptions, and uncertainties which may cause our actual or future results and performance to be materially different from those expressed or implied in these statements. The risks and uncertainties that could cause our results to differ materially from our current expectations include, but are not limited to, those detailed in our latest earnings release and in our SEC filings. This morning, we will review our business as well as results for the quarter. With that, I will pass it over to Chi-Chao.

Thanks, Eric. Earlier this year, we laid out the goal to transition to B-samples, and I'm happy to report we're almost there. We expect to sign a B-sample joint development agreement, JDA, with one of our OEM customers in the next few weeks. This will be the world's first automotive B sample for lithium metal. This will be a historic milestone for SCS, for the battery industry, and for the future of transportation. We had to overcome monumental challenges to get to this point. One of the most important challenges was safety. And we're not talking about lab-scale safety. We are talking about practical, real-world safety. In the battery industry, there's an inherent trade-off between energy density and safety. Many companies improve safety by using safer chemistries, such as lithium iron phosphate, LFP cathodes, or cellulose electrolytes. LFP is indeed safer than high nickel cathodes. And in theory, cellulose appears to be less volatile than liquid lithium metal. So why don't we switch to these safer chemistries? While these safer chemistries appear to improve safety, we believe they make unacceptable compromises to energy density, manufacturability, and other important parameters. For example, an LFP cathode has about half the energy density of a high nickel cathode. And solid-state has yet to prove its manufacturability and performance in a cell that can actually be used in a real-world application. So what's the point? We don't want our cells to be impractical, but safe. We want our cells to be alive, powerful, and safe. Our goal all along has been to improve safety without any compromises to other parameters. We start with a high energy density approach that has inherently higher safety risk than a lower energy density solution. And we make it safe. It's extremely difficult, but we have always chosen to do things the hard way. That is what we will have achieved to qualify for automotive B sample for liquid metal. No one thought lithium metal with a high nickel cathode would achieve the level of practical safety that we recently demonstrated in our internal testing. This was a culmination of very exciting fundamental breakthroughs in materials and engineering. Even advanced lithium ion with a high nickel cathode can have severe safety risks, and we believe our advancements address the safety issues in both lithium ion and lithium metal. For example, our new high nickel cathode active materials have the same capacity as equivalent traditional high nickel cathodes, but are much more stable. Our new cathode electrode coating and treatment process allows the same cathode to pass rigorous safety tests, including nail penetration and heating. As new power cell engineering with a self-denting mechanism that allows gradual safe release of energy during thermal runaway, a new electrolyte that is safer with no compromise on performance, a new protected lithium-ion anode, and a new charging protocol that improves overall safety. These are fundamental breakthroughs in both engineering and materials, not just for lithium metal, but also for lithium-ion, especially our developments in the catalyst. We are now able to delay the thermal runaway onset temperature and reduce peak temperature and pressure during thermal runaway significantly. Some companies that are in earlier stage of lithium metal development talk about dreams of perfectly safe batteries. In most cases, the battery capacity or energy density is so low that it's useless. To be an automotive B sample, which we believe is the most advanced in metal development anywhere in the world, we deal with practical safety concerns, not dreams on paper. It's exhilarating to see our batteries during safety tests going from big explosions to small explosions to big fires to small fires to just smoke. It feels like witnessing a successful rocket launch after many failures. We recently completed our second testing bunker. Now we have even greater resource to test new things. For many people, risk means danger and should be avoided. For us, risk means innovation and we embrace risk by creating a safe environment to test unsafe things. Without these bunkers, without this safe environment to test unsafe things, we will not be able to understand the mechanism. will not be able to make unsafe things safe and next generation batteries and transportation will not be able to move forward at our upcoming battery world 2023 in december we will demonstrate some exciting videos of high energy density liquid metal batteries passing very rigorous safety tests we never thought we could achieve such safety while maintaining high energy density This is a big milestone towards our goal of commercializing large capacity, high energy density lithium-ion cells for automotive applications. In terms of manufacturability, last quarter, we indicated we will increase our A sample lines to 1,000 large capacity 100-amp-hour cells per line per month from approximately 500 per month. November will be the first month that we will attempt to build 1,000 A-sample 100 mCov cells at our Chungju line in Korea. These cells will be used for both internal testing and OEM sample qualification and avatar safety prediction algorithm training. We currently have three A-sample lines in operation and two B-sample lines under preparation, one line for an EV application and one for a UAM application. For the two B sample lines, we are in the final stages of completing our vendor qualification review. We expect to continue to use the A sample lines for B sample cell development until the new B sample lines become operational, which we expect to occur in 2024. By running our lines up to 1,000 large 100-amp-hour cells per month, We will also gain valuable experience in avatar cell traceability and quality system development. We have even hired a dedicated field data collection team to help ensure that the data are correct and collected through the correct process. This team helps our avatar algorithm safety prediction tremendously by providing verifiable and complete data. In summary, earlier this year, we established a milestone to transition to B-sample. and we are almost there. This is a major milestone for us and for the battery and transportation industry, and it's a result of solid, fundamental, hardcore material chemistry and cell engineering breakthroughs in safety for high-energy density lithium metal batteries with a high nickel capital. From A-sample to B-sample JDAs with EVOEMs, The most important value of these JDAs is helping us build a solid foundation in technology development, process development, engineering development, quality development, and manufacturing development. With this solid foundation, we're now able to expand into other applications that are ideal for our unique high energy density and high power density lithium metal batteries, such as drones and urban air mobility, UAMs. These applications also represent early-stage commercialization opportunities for us. We are very excited about the UAM opportunity and believe that lithium metal will enable UAM in the 2020s the same way that lithium-ion enabled portable consumer electronics 30 years ago in the 1990s. The world's first lithium metal B sample will be a small step for FCS but has the potential to be a giant milestone for the future of sustainable transportation, both on land and in air. Now I'll hand the call over to Jun.